After leaving residential mortgage lenders guessing for many years, the California Department of Business Oversight (“DBO”) finally provided the industry with some guidance on the documentation licensees may use to verify compliance with the state’s per diem statutes.
The California per diem statutes (Financial Code § 50204(o) and Civil Code § 2948.5) prohibit a lender from requiring a borrower to pay interest for more than one day prior to the disbursement of loan proceeds, subject to some limited exceptions.
In 2007, the DBO issued Release No. 58-FS (the “2007 Release”), which provided guidance on acceptable evidence of compliance with Financial Code § 50204(o):
- A final, certified HUD-1 that reflects the disbursement date;
- Written or electronic records of communications between the licensee and the settlement agent verifying the disbursement date of loan proceeds and identifying the name of the settlement agent providing the information and the electronic or business address used to contact the settlement agent; or
- Contemporaneous written or electronic records of oral communications between the licensee and the settlement agent verifying the disbursement date of loan proceeds and identifying the name and telephone number of the settlement agent providing the information.
Of course, much has changed since 2007, including the enactment and implementation of TRID, which replaced the HUD-1 with the Closing Disclosure. Continue Reading Carpe Per Diem Redux — California Clarifies How to Document Compliance